A Liaison Office (LO) functions as a place in India which represents a foreign company predominantly to comprehend and explore the general business environment, market research for the products of the parent company and to provide and seek information from potential customers or vendors. A liaison office can be established for representing in India the parent company/group companies, Promoting export/import from/to India, Promoting financial collaborations between parent/group companies and companies in India and to Act as a communication channel between the parent company and Indian companies. In the case of a liaison office, the foreign company cannot engage in any commercial activities, and the parent company shall bear all the expenses of the liaison office. A liaison office is a foreign company and Indian government taxes the profits of such entities when it carries out the transactions which amount to commercial activities through a permanent establishment (PE) at higher rates. As of now the tax on the profit of the foreign company is 40% in contrast to the tax rate @ 30% on Indian company.